I tend to hold a grudge. Proper maintenance of this personality trait leads me to watch The Big Short about once a year to refresh memories and refocus angers of that time when my 401K dropped by about 38% because of such foolishness. (Around the same time each year I also tend to pull out my highlighted hardcopy of The Auto Bailout and the Rule of Law…a wonderful reminder of the uni-Party/Ruling Class aspects of the foolishness.) Being sensitized to the subject in this way, my eyes (and attention) seem to be drawn to references like this:
You may recall that a major contributor to the financial crash of 2008 was Wall Street wizards packaging up a bunch of sub-prime mortgages, securitizing them, and then selling those “mortgage backed securities” to investors as something other than perfumed garbage. That is effectively what Tricolor has been doing with its auto loans, with the help of Wall Street.
Of course, with that, a grudge-holder like my must move on to the full story:
Tricolor Auto Group, the nation’s seventh largest used car dealer (and 3rd biggest in Texas and California), just filed for Chapter 7 bankruptcy – e.g. liquidation. Its target customer had been illegal aliens, and with President Trump deciding to start enforcing the nation’s immigration laws, there has suddenly been a major “market correction” in that market segment. Not only has the customer base largely evaporated, but so have loan repayments, which Tricolor also serviced. …
While the sudden loss of customers and loan repayments was the catalyst that caused the final collapse of Tricolor, its failure has revealed so much more, including securities fraud, Wall Street ESG gimmickry, race-based federal programs, etc.
Tricolor has securitized more than $2 billion of its very high risk auto loans over the past seven years. The most recent issuance was in June of this year, with JP Morgan Chase and other money center banks peddling more than $200 million of “social bonds” to credulous investors. These securities are certified as “social bonds” by the US Treasury’s CDFI (“Community Development Financial Institution”) program because Tricolor focuses on selling its cars and financial services to underserved communities, specifically Spanish-speaking non-citizens. …
Blackrock, JP Morgan Chase, and all the other titans of Wall Street who bought into the hype about ESG investing deserve the loss they are going to take.
It turns out that circumstances in my life have had me spending more time than I like for many years now traveling north and south on the major roads between Texas and several of the Great Plains states to the north. At some point in recent years, I began noticing these odd caravans of used cars…always heading south. The primary feature of these was the three-car-bundle….one very used-up ‘used car’ towing two even more used-up ‘used cars’. Sometimes just one bundle but, most often two to four bundles, in the caravan. Now, I’m not a used car salesman, but it always seemed to me that even the gas invested in this type of transfer didn’t make sense in any kind of legitimate business venture. I guess this addition of the term “Tricolor Auto Group” to my vocabulary will serve as a confirmation of that hunch…and a reinforcement to that same old grudge.
As always: FJB.
the philo t. custis institute 